Correlation Between Hello and Prosus

Can any of the company-specific risk be diversified away by investing in both Hello and Prosus at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hello and Prosus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hello Group and Prosus, you can compare the effects of market volatilities on Hello and Prosus and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hello with a short position of Prosus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hello and Prosus.

Diversification Opportunities for Hello and Prosus

0.02

Correlation Coefficient

Hello  Prosus

Significant diversification

The 3 months correlation between Hello and Prosus is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hello Group and Prosus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus and Hello is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hello Group are associated (or correlated) with Prosus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus has no effect on the direction of Hello i.e., Hello and Prosus go up and down completely randomly.

Pair Corralation between Hello and Prosus

Given the investment horizon of 90 days Hello Group is expected to under-perform the Prosus. But the stock apears to be less risky and, when comparing its historical volatility, Hello Group is 1.2 times less risky than Prosus. The stock trades about -0.05 of its potential returns per unit of risk. The Prosus is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,000  in Prosus on December 28, 2024 and sell it today you would earn a total of  895.00  from holding Prosus or generate 22.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Hello Group  vs.  Prosus

Hello Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hello Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Prosus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prosus reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hello and Prosus

The main advantage of trading using opposite Hello and Prosus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hello position performs unexpectedly, Prosus can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Prosus will offset losses from the drop in Prosus' long position.

The idea behind Hello Group and Prosus pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.